The project will use a Micronex sludge processing plant, developed by First American Scientific Corporation (FASC), currently being built at Aylesford Newsprint in Kent.
WRAP paper product manager David Adams said that previous uses for paper mill sludge had been limited, but the project aimed to explore other options for the material.
"This technology is one of the first that can effectively separate fillers from fibres, and if successful, the potential could be unlimited."
UK mills generate around 1m tonnes of sludge per year which ends up mainly in landfills or incinerators. New uses for the sludge could be for insulation or in low-grade packaging products.
The KDS Micronex can dewater sludge and enables the separation of paper fibre from other components such as kaolin clay.
Aylesford Newsprint commercial manager, Chris White said once the KDS Micronex is operational, it will work at a speed of one tonne per hour.
One use for the slurry could be as a fuel for the plant, which White said could significantly reduce the firm's gas costs.
The machine is expected to be ready by May. Once operational it will separate the short fibers and calcium carbonate in the slurry.
WRAP's role will be to monitor the project and develop products and market them, once successful trials have been completed.
However, this will be assessed over a period of eight to 10 months.
Aylesford was selected following an invitation for bids by WRAP, with the firm chosen from the six mills that applied.
Based in Canada, FASC develops environmental technologies for use by industry.
Story by Andy Scott